Intercontinental Exchange's (NYSE:ICE) 14% CAGR outpaced the company's earnings growth over the same five-year period
If you want to compound wealth in the stock market, you can do so by buying an index fund. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Intercontinental Exchange, Inc. (NYSE:ICE) share price is 83% higher than it was five years ago, which is more than the market average. We're also happy to report the stock is up a healthy 26% in the last year.
The past week has proven to be lucrative for Intercontinental Exchange investors, so let's see if fundamentals drove the company's five-year performance.
View our latest analysis for Intercontinental Exchange
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Intercontinental Exchange managed to grow its earnings per share at 3.6% a year. This EPS growth is slower than the share price growth of 13% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Intercontinental Exchange has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Intercontinental Exchange, it has a TSR of 96% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Intercontinental Exchange shareholders have received a total shareholder return of 28% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 14%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 2 warning signs we've spotted with Intercontinental Exchange (including 1 which is potentially serious) .
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
